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Tea firms take competition too far
12 | 07 | 2007
It is generally accepted that competition leads to greater efficiency and better quality. If that is the case then the Vietnamese tea industry is doing things the wrong way round.

Increased competion has led to reductions in quality and quantity.

Since the beginning of 2007, tea exports averaged 7,400 tonnes a month, earning some US$1,100 per tonne.

Compared to 2006, the price has decreased by five per cent, and is at least 30 per cent lower than in many other countries, where tea sells for between $1,500-2,200 a tonne.

Clearly, even if yields were to go up, reduced prices would eat away at the benefits of increased production.

According to the Viet Nam Tea Association (VITAS), there are currently about 250 main tea-processing plants in the country, with a combined capacity of 70,000 tonnes per year. In some tea-growing areas, there are tens of thousands of small tea-processing facilities. The number of these small, privately owned units has undergone a three-fold increase in the last seven years. However, these units’ processing technology is antiquated and inefficient and they are competing for material sources.

In a bid to raise standards, the Ministry of Agriculture and Rural Development advised farmers on the best tea varieties to grow.

The market mechanism leads to increased competition, which should lead to greater efficiency and higher standards. However, the way the tea industry is going in Viet Nam, far from improving yields, market forces are likely to devastate domestic tea production and damage the whole economy, warn industry experts.

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